The FSA is proposing a new framework that will triple fines. It says as the likelihood of detecting breaches in small firms is relatively low compared with a larger, relationship-managed firm, the penalty must be high to achieve cre- dible deterrence.
Aifa director general Chris Cummings says: “The FSA is raising penalties because it cannot do its job properly and supervise firms adequately. It should take more care at the authorisation stage and not let people in that should not be there. Those it does let in should be supervised closely for six to nine months, then the regulator should use a system that rewards good behaviour.”
But FSA director of enforcement Margaret Cole says that the system of supervision for small firms is “valid and appropriate”. She says: “The model has to recognise that across the greater population there is an issue over discovery and detection of wrongdoing. I do not think you can translate that into not doing our job properly.
“Small firms benefit from our supervisory approach and we want to make sure that they do not take advantage of that by engaging in wrong-doing because they have a view that they are not going to be found out.”